Cars and Drivers

Toyota Bets Against Battery Electric Cars

To hear some analysts and auto enthusiasts tell it, it’s a done deal: The car of the future will be battery-powered.

That’s the big bet that Tesla Motors (NASDAQ: TSLA) and its investors have made.

It makes some sense. It’s increasingly clear that the auto industry will move past internal combustion at a certain point. And Tesla’s Model S has proven that a batteryelectric car can be both practical and desirable.

But not everyone considers a battery-operated automotive future to be a done deal. And when I say “not everyone,” I’m not just talking about cranks I’m talking about some big names.

Like Toyota (NYSE: TM).

A very big name turns away from battery-electric cars
Few companies know more about batterypowered cars than Toyota. The company’s Prius is far and away the world’s bestselling hybrid. Toyota has built over 6 million hybrids to date. And the Japanese automaker is a big investor in Tesla.

Toyota has spent 20 years trying to create a viable massmarket batteryelectric vehicle.  But lately, the company has hinted that it has given up the effort.

Toyota North America chief Jim Lentz recently told Automotive News that the company doesn’t see batteryelectric vehicles as a viable massmarket proposition.

Lentz said the technology is only viable in “a select way, in short range vehicles that take you that extra mile, from the office to the train, or home to the train, as well as being used on large campuses.”

For a primary vehicle intended for longerrange travel, Toyota feels there are better alternatives, like hybrids. And like fuel cells, the technology the company is investing heavily in now.

A big bet on a new-to-market technology
Fuel cells are devices that take energy from a fuel (usually hydrogen gas) and chemically convert it to electricity. Hydrogenpowered fuelcell vehicles are electric cars that run on “gas” hydrogen gas but their only “exhaust” is water vapor.

Automakers have been tinkering with this technology for decades. But it’s coming to market: Hyundai (NASDAQOTH: HYMTF) already offers a cell version of its Tucson SUV at a few dealers in Southern California, while Toyota and other companies say they will bring fuelcell cars to market in a bigger way over the next couple years.

Toyota has been showing off a vehicle called the “FCV Concept” that is widely believed to be a preview of the fuelcell car the automaker plans to start building next year.

That’s the most visible aspect of the company’s shift in emphasis. But that shift is real, and it’s recent.

Back in 2010, Toyota invested about $50 million in Tesla, and the two companies agreed to a deal in which Tesla would provide the drivetrains for a batteryelectric version of Toyota’s RAV4 SUV.

But after buying Tesla components for about 2,600 electric RAV4s, Toyota recently ended that deal. The product had a lot of promise, but there were increasing signs that sales were slow.

While Lentz acknowledged that Toyota learned a lot from working with Tesla, he told Automotive News that the decision to end the deal was simple: He’d rather invest the money in fuel cells.

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So are hydrogen cars the future?
Nobody knows. Right now, Toyota thinks they’re a better bet than batteryelectric cars. That means something because of Toyota’s greencar cred and status in the global auto industry, but this is just one voice, and the company may yet be wrong.

The nearerterm question is whether Toyota’s upcoming fuelcell car will sell. It will depend on the car’s pricing and the availability of refueling stations. There aren’t very many now, but more are coming, at least if you live in California.

Toyota has arranged a $7 million loan to a company called FirstElement Fuel that is building hydrogen stations in California. The company expects to have a basic network of stations in place by fall 2015, with 50 in operation by the end of 2016.

Toyota’s reputation for quality will help sales and speed greater adoption of the technology, if the overall package makes sense as more than a technological curiosity. We’ll see.


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